Question

mary invested £12000 in a savings account. the account pays 1.5% compound interest per year. work out value of her investment after 2 years

Answer 1

Hi there! The formula for compound interest is P(1 + r)^t, where P = Principal (initial amount), r = rate (percentage rate), and t = time (years). Let's start off by adding 1 to the percentage rate in decimal form. 1.5% is 0.015 in decimal form. 1 + 0.015 is 1.015. The amount of time is 2 years, so we raise that decimal to the 2nd power. 1.015^2 is 1.030225. Do not delete this decimal from the calculator. Now, let's multiply it by the principal, which is 12,000 British pounds. When you multiply that decimal by 12,000, you get 12,362.70. There. Mary's investment will be a value of £12,362.70.